Thompson is one of the few hedge fund managers who has consistently outperformed the market, and his fund is betting big against Tesla. What follows are some passages about Tesla from Thompson’s recent investor updates:

I think Tesla is going to crash in the next 3-6 months. . .

. . . partially due to their incompetence in making and delivering the Model 3, partially due to falling demand for the Model S and X, partially due to the extreme valuation, partially due to their horrendous finances that will imminently require a huge capital raise, partially due to a likely downgrade of their credit rating by Moody’s from B- to CCC (default likely) which should scare their parts suppliers into requiring cash on delivery (a death knell), partially due to the market’s recent falling appetite for risk, and partially due to our suspicions of fraudulent accounting activities, evidenced by 85 SEC letters/investigations and two top finance people leaving in the last month. . .

Tesla, without any doubt, is on the verge of bankruptcy.

The company cannot survive the next twelve months without access to capital from Wall Street Banks or private investors.

We estimate that Tesla will need roughly $8 billion in the next 18 months to fund operating losses, capital expenditures, debts coming due, and working capital needs.

However, it appears that due to past SEC investigations and current investigations (which terrifyingly have not been disclosed by the company), it will likely be difficult for Tesla to access public markets.

According to a recent analyst report, there have been 85 SEC requests for additional information and disclosures in the last 5 years.

This compares to Ford Motor Company’s total of zero over the same time frame. This means that Tesla is pushing many, many boundaries.

When a company is under formal investigation, it is difficult, if not impossible, to raise capital from public markets as these investigations must be made public, which generally craters the equity and debt values.

Therefore, Tesla investors better hope there are a number of Greater Fools in China or elsewhere to keep the company solvent.

At some point, the music stops and there aren’t any open chairs.

No matter how good a social investment makes you feel as it is going up, extreme anger will result if most or all of your money is permanently lost, especially when it is due to false and misleading statements by senior company officers.

This is when the [Department of Justice] steps in and escorts untruthful managements to their new living quarters.

. . . As a reality check, Tesla is worth twice as much as Ford* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss.

Further, Ford has $12 billion in cash held for “a rainy day” while Tesla will likely run out of money in the next 3 months.

About the Author

Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.